Taobao chaos after fee-rise protest

THOUSANDS of small vendors have disrupted online shopping platform Taobao Mall in a protest at higher service charges by buying products from major retailers and immediately demanding refunds.

Vendors were forced to suspend transactions on Tuesday night as Taobao's rules state that any seller refusing to grant refunds will face penalties.

"Currently dozens of vendors are affected and Taobao Mall has reported to the police and we'll do what we can to ensure their normal business operations," said Zhang Yong, president of Taobao Mall.

On Monday, Taobao announced it was to increase its annual service fee to 30,000 yuan (US$4,718) or 60,000 yuan from January, depending on the type of product sold. Previously the fee was just 6,000 yuan.

"We won't be able to pay the service fee because as a start-up, our profit is too slim to support our operation," said one vendor called "Yang1981" who started his business just last year.

Alibaba Group split its consumer e-commerce operations three months ago into the Mall, Taobao Marketplace, a site that hosts trade between individual buyers and sellers, and eTao, its online shopping search engine business.

Taobao Mall features more branded vendors and retailers, in contrast to individual vendors at Taobao Marketplace.

Taobao Mall said yesterday that the new charge was designed to help buyers enjoy better service and they would not be changing the rule in the face of "intimidation and threats."

It said that vendors could get back half or all of their service fee if they reached a certain transaction volume and an above average customer rating. Clothing vendors, for example, would get all their service fees refunded if their annual sales reached 1.2 million yuan.

Online, industry watchers pointed out it might be hard for start-up businesses to achieve a sufficient level of sales to qualify for their money back. Raising the service fee could also result in increased prices.

Taobao Mall enjoys the biggest share of China's B2C (business to consumer) market at 33 percent, followed by 360Buy and Amazon.cn, according to the research firm Analysys International.

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